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The French renaissance economy from the locking coronavirus appears stronger than expected, with a measure of private sector activity growing for the first time in four months.
Markit’s IHS of Purchasing Directors of the Index jumped to 51.3 in June from 32.1 in May, beating economists’ expectations by 46.8. The individual gauges for the manufacturing and services sectors have also risen above the 50 key level.
The euro rose after the report and traded at $ 1.1292 at 9:20 a.m. Paris time. European stocks opened higher, with the CAC 40 Index up 1.2%.
Given the nature of the bans and their impact on economies, the surveys are only to give a partial picture of what is happening to businesses and households. Yet the reading echoes a recent analysis by INSEE, France’s statistical office, that the economy is returning to normal activity levels faster.
A rebound in short-term activity was expected to reopen economies, but there is still great uncertainty about the long-term consequences of the virus. Social distance, consuming worries and other disruptions to the full recovery will take time. The expected rise in unemployment could keep household spending in check, as well as confidence-building measures improve.
Banque de France, Governor of François Villeroy de Galhau said that the recovery could resemble a bird’s wing, where there is a strong initial collection, and then a milder trend thereafter.
“If I were to give form to the recovery, I would say it’s half a V, because we have climbed very fast and we expect we will continue to climb more slowly,” he said on RTL radio the week last. “Basically, it’s a wing-shaped cover of a bird.”
The PMI also showed that demand remained subdued in June, with new orders continuing to fall. New export business declined, and job losses continued, led by services.
((Updates with market reaction in the third paragraph.)